This Seventh Amendment to Loan and Security Agreement is entered
into as of February 2, 2018 (the "Amendment"), by and among TELKONET, INC. ("Borrower"), and HERITAGE BANK
OF COMMERCE ("Bank").

RECITALS

Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of September 30, 2014 and as amended from time to time, including pursuant to that certain First Amendment to
Loan and Security Agreement dated as of February 17, 2016, that certain Second Amendment to Loan and Security Agreement dated as
of October 27, 2016, that certain Third Amendment to Loan and Security Agreement dated as of January 25, 2017, that certain Fourth
Amendment to Loan and Security Agreement dated as of March 29, 2017, that certain Fifth Amendment to Loan and Security Agreement
dated as of August 29, 2017 and that certain Sixth Amendment to Loan and Security Agreement dated as of October 23, 2017 (collectively,
the "Agreement").

AGREEMENT

NOW, THEREFORE, the parties agree as follows:

1.

Section 6.9(b) of the Agreement is amended and restated
in its entirety to read as follows:

(b)

EBITDA. Measured as of the end of each fiscal quarter,
the maximum year-to-date EBITDA loss for Telkonet, Inc. shall not exceed the amounts set forth below:

Fiscal Quarter Ending

Year-to-Date EBITDA Loss

March 31, 2018

($1,059,000)

June 30, 2018

($1,271,000)

September 30, 2018

($1,911,000)

December 31, 2018

($2,090,000)

Notwithstanding the foregoing, if Telkonet, Inc. deviates from
its projected EBITDA by an amount that is less than $100,000 for any particular measurement period, Borrowers shall be deemed in
compliance with this Section 6.9(b).

2.

Exhibit D to the Agreement is replaced in its entirety
with the Exhibit D attached hereto.

3.

Borrower represents and warrants that the representations
and warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default
has occurred and is continuing.

4.

Unless otherwise defined, all initially capitalized terms
in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and
effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth
herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any
right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the
continuing effectiveness of all agreements entered into in connection with the Agreement.

5.

This Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one instrument. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a ".pdf' format data file, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect
as if such facsimile or ".pdf' signature page were an original hereof.

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6.

As a condition to the effectiveness of this Amendment,
Bank shall have received, in form and substance satisfactory to Bank, the following:

(a)

the original signed Amendment, duly executed by Borrower;

(b)

payment of all Bank Expenses incurred through the date
of this Amendment; and

(c)

such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the undersigned have executed this Amendment
as of the first date above written.

TELKONET, INC.

By: /s/ Richard E. Mushrush

Name: Richard E. Mushrush

Title: CFO

HERITAGE BANK OF COMMERCE

By: /s/ Karla Schrader

Name: Karla Schrader

Title: VP

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EXHIBIT D

COMPLIANCE CERTIFICATE

TO:

HERITAGE BANK OF COMMERCE

FROM:

TELKONET, INC. and ETHOSTREAM LLC

The undersigned
authorized officer of Telkonet, Inc., on behalf of all Borrowers, hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in
complete compliance for the period ending _______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and correct as of the date hereof Attached
herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.